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2020’s agrifoodtech investment story speaks of resilience, maturity & big bets on what comes next

February 25, 2021

Zero percent of us would choose to go through another year like 2020 (2021 isn’t exactly spectacular yet, either). But for the agrifoodtech sector, we pen 2020 as the year investors got serious.

We could thank the Covid-19 pandemic… but then, why would we thank the pandemic?

Deals made and dollars disbursed in 2020 were the highest on record, surpassing 2019 levels, according to AgFunder’s 2021 AgriFoodTech Investment Report [disclosure: AgFunder is AFN‘s parent company]. As more data trickle in, total dollars committed to agrifoodtech ventures in 2020 is expected to hit $30.5 billion. That represents a 34.5% increase over 2019 investments.

The sector’s stellar performance is attributable to an increasing number of really big rounds, signifying a maturing sector with a few clear outliers.

Michigan-based cold storage and warehousing venture Lineage Logistics’ $1.6 billion funding round accounted for 5% of the projected investment total. Plant-based meat company Impossible Foods raised two rounds totaling $700 million, leading a long and increasingly tech-diverse roster of investor-backed alternative protein companies. China-based Furong Xingsheng’s $700 million round topped the list of e-grocery deals; that list was dominated by Furong Xingsheng’s domestic peers.

There were also a lot of really small rounds, which speaks to investor confidence in placing their bets on the agrifoodtech sector at large, and on the next generation of early-stage innovations and technologies. Early-stage investments grew 10% year-over-year in 2020; the number of deals grew 15%.

Upstream love

A trend we noticed mid-year held through the end of 2020: that for the first time in years, upstream ventures — the technologies closest to the farm — outpaced their downstream peers in both number of deals and dollars invested. Upstream technologies secured $15.8 billion across 1,950 deals to downstream technologies’ $14.3 billion across 1,142 deals.

Moreover, investors placed bets on a lot of new upstream technologies. Early-stage upstream ventures closed 30% more deals and nearly 50% more capital year-over-year; early-stage downstream activity actually decreased – by nearly 10% in deal count and 25% in dollars invested.

We are neutral observers, to be sure. But what is nevertheless exciting about the performance of the upstream side of agrifoodtech is that it signifies investors’ growing confidence with the food and agriculture industry’s tech transition. The technologies closest to the farm tend to be more capital intensive and difficult to test; they also take longer to get to market and secure uptake than their software-heavy downstream peers.

Even just a few years ago, new agri-inputs, farm robotics, novel farming systems, and innovative foods were deemed too “risky” for all but the most specialized investors. Today, there is a flood of generalist investors backing such technologies.

Take San Francisco-based cellular meat company Memphis Meats. Its earliest investor, in 2015, was SOSV—a venture capital-backed startup accelerator for high-impact hardware and life sciences ventures. Back then, cost projections for lab-grown meat products like the ones Memphis is developing were in the hundreds if not thousands of dollars per unit.

Today, as unit costs inch towards the single digits, investors like Temasek and SoftBank are getting on board: both investment firms backed Memphis Meats’ $161 million Series B round last year.

Disruption resilience

Midstream and downstream, the companies that raised were undoubtedly buoyed by investors’ and consumers’ reactions to the pandemic and its early shocks to the global food supply chain.

Backing for Lineage Logistics, the top midstream deal—and 2020 deal overall—was a $1.6 billion testament to the need for a robust and reliable system for moving food safely regardless of global circumstances (the company automates some of its functions, curbing its dependence on human labor.)

eGrocery companies collectively secured billions of dollars from investors to ensure food made it the last mile to consumers. The biggest winners in the category were China’s e-grocery companies, like Furong Xingsheng but also Yipin Fresh, which raised $360 million, MissFresh ($306 million), Dingdong Maicai ($300 million), Tongcheng Life ($200 million) and Nice Tuan ($196 million). Collectively, China’s e-grocery companies raked in $2.9 billion in 2020, or 57% of the category total last year.

A less intuitive but positive trend: the rebound of retail and restaurant technologies. The tech category took a hit in the first half of the year amid widespread lockdowns that shuttered shops and restaurants and sent restaurant patrons to delivery apps. By the end of the year, it ranked third for investment dollars committed at $2.4 billion and second for number of deals, albeit fewer deals than in 2019.

Ticket sizes for retail and restaurant technology companies tended to be in the millions, with a few eight-figure deals. UK-based Karma Kitchen, which operates community and ghost kitchens, was an exception, raising $316 million in July. So was China’s Bianlifeng, which scored $100 million for social distancing-friendly “cashierless” convenience stores and vending machines.

But the sector’s quick rebound is something about which we can all feel good (or take a breath, if you’re more of a cautious optimist in these trying times): it means these companies are successfully pivoting, and successfully helping traditional restaurants and retailers pivot. It speaks to the agility and creativity of the agrifoodtech space, and that these characteristics (and the entrepreneurs who espouse them) are helping us all move forward.

Download the 2021 AgFunder AgriFoodTech Investment Report in full here. Your feedback is welcome. Please send it to [email protected]

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